Business

Indian billionaire Ambani questioned in telecom scandal

Anil Ambani
Image caption Billionaire Anil Ambani is the highest profile person to be questioned in connection with the telecom scandal

Anil Ambani, the billionaire chairman of Reliance Communications, has been questioned as part of a probe into a phone-licence selling scandal.

A statement from the company said the visit was voluntary.

The ongoing investigation is looking into whether mobile phone licences were sold at below-market prices in 2008.

Claims that the government lost more than $30bn (£18.6bn) in revenue have caused months of political conflict and shaken investor confidence.

Reliance Communications shares have declined 30% in value this year, making them among the worst performers on the Bombay Stock Exchange's main Sensitive Index.

On Thursday, JP Morgan cut its target price on the mobile operator by 49% to 82 rupees.

It cited lower estimates for the firm's wireless and broadband businesses and issues related to licence regulations.

Shares of Reliance Communications were at 98.90 rupees in early morning trade in Mumbai.

Wider reach

As well as hurting the stock market, the scandal has caused political turmoil in India as well.

Earlier this month, federal officials arrested former telecommunications minister Andimuthu Raja.

Image caption Former Telecommunications Minister Andimuthu Raja was arrested this month

They allege that Mr Raja violated guidelines in the second-generation (2G) phone licence sale, and conspired to favour certain telecom companies.

India's chief auditor said in November that the 2G licences were sold for about a tenth of their value. The government has questioned the figure, claiming it is too low.

One of the phone companies that allegedly benefited during the licence sale was Swan Telecom, in which Reliance Communications is an investor.

However, Reliance Communications said that it only held a small percentage of the equity share capital of Swan Telecom at the time, and that none of its employees benefited.

Deeper problem?

This and other corruption scandals have rocked India's ruling coalition government.

On Wednesday, Prime Minister Manmohan Singh vowed to punish those found guilty of fraud.

"I wish to assure the country as a whole that our government is dead serious in bringing to book all wrongdoers, regardless of the position they may occupy," the prime minister said.

Last week, the stock market found itself caught up in the twists and turns of this scandal.

A sudden sell off last Wednesday in Mr Ambani's Reliance ADA Group wiped $2.5bn from its value.

Reliance ADA Group is the parent company of Reliance Communications and five other subsidiaries.

The company blamed the slump in share price on "baseless and motivated rumours" spread by rivals.

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